Police in the cash-for-honours inquiry are examining details of meetings attended by Lord Levy, Labour's chief fundraiser, at which the question of political honours may have been discussed, the Guardian has learned.

Detectives are investigating whether Lord Levy later suggested to colleagues that they should not draw attention to his involvement in the discussions because of the fevered atmosphere surrounding the inquiry.

Lord Levy has been arrested on suspicion of conspiracy to pervert the course of justice, but yesterday vigorously denied any wrongdoing.

He had an advisory role in the submission of honours nominations. The shortlists are drawn up before they are presented to the Lords Appointments Commission. Typically, those meetings would include Downing Street staff and senior members of the party. But the final decision about who is to be nominated is taken by the prime minister.

Political sources said yesterday it would be perfectly legitimate for Lord Levy to attend meetings at which honours were discussed. Loans or donations given by party members should not preclude anyone from being considered for an honour by the prime minister, they said.

It is understood that Lord Levy did not contribute any names to the lists nor offered honours to any financial backer, but was simply asked for his opinion on potential peers.

The latest twists in the investigation came as it emerged that:

· Detectives investigating whether political parties broke election law by accepting uncommercial loans in the run-up to the last election have run into problems after the Electoral Commission admitted its rules were too vague.

· An injunction against the BBC was lifted, enabling it to publish its story which concerned a note written by the Downing Street aide Ruth Turner to her lawyers about Lord Levy.

· The Metropolitan police and the attorney general, Lord Goldsmith, expressed their anger that the Guardian had revealed that a meeting between Lord Levy and Ms Turner lay at the centre of the police inquiry.

A high court judge permitted the newspaper to go ahead with the publication of its story on Monday night despite a desperate two-hour attempt by Lord Goldsmith to seek an injunction preventing publication.

The Guardian reported that Ms Turner expressed concern in a legal document that Lord Levy was asking her to shape her recollection of events leading up to the nomination of honours to some Labour donors. The document was passed by her lawyers to the police. There is no evidence that this document recounting her differences with Lord Levy was passed to Jonathan Powell, Tony Blair's chief of staff, although at one point she apparently considered doing so.

It was being stressed by police sources yesterday that they did not regard Ms Turner, still under police bail, as in the clear, and she still had issues to answer about her cooperation with the inquiry.

Some police sources accused the Guardian of seeking to ruin their investigation by disclosing that the dispute between Ms Turner and Lord Levy lay at the heart of the inquiry. The Guardian contends that it has not revealed anything that is unknown to the relevant witnesses.

Following the judges' decision on Monday night not to grant an injunction preventing publication of the story, the attorney general decided yesterday morning to no longer seek to maintain a separate injunction imposed on the BBC preventing it from publishing its own similar version of the same story and a high court judge lifted the injunction.

The injunction had originally been granted after an application by the attorney general urged on the government's chief law officer by the police. The injunction startled some at the BBC in view of the stream of previous leaks from the inquiry.

In a vehement and emotional statement yesterday Lord Levy protested his innocence, claimed he was the victim of a smear campaign and raised doubts whether he would be able secure a fair trial if a criminal case were ever brought. He said the near year-long investigation was placing a huge strain on his family. His rabbi said Lord Levy believed he was being leaked against by the police, and was the victim of anti-semitism.

Despite the difficult meeting with Ms Turner, Lord Levy continued to secure support from some of the prime minister's closest allies yesterday who insisted that no offence had been committed or covered up.

In the statement his lawyers said: "Lord Levy categorically denies any wrongdoing whatsoever. He has done so throughout this very protracted police investigation. The current round of reports in the media, which are said to be based on leaked material under consideration by the police, are partial, contradictory, confused and inaccurate. There has been a regular stream of leaks to the media during this year-long investigation, all of which have presented a prejudiced and distorted view. Cumulatively, these leaks and reports have created a climate which does not allow for any fair assessment of the investigation.

"All the reports appear to be based on secondhand information given by someone or some people who are intent on smearing Lord Levy. They also seem to want to manipulate the outcome of the police inquiry against Lord Levy.

"Any fair-minded person must realise the intolerable burden that is placed on Lord Levy and his family by this media-style trial when Lord Levy is unable to defend himself whilst the police investigation continues.

"Lord Levy respects the importance of maintaining the integrity of the police inquiry and so is unable to comment further at this time. We have asked the police, whose investigation this is, to find out where the leaks are coming from."

Scotland Yard, in a statement condemnded the Guardian's decision to publish yesterday's story, said: "We are disappointed that the Guardian chose to publish their story today, despite our request for an undertaking not to publish ... followed by our decision to inform them we would seek an injunction.

"Although the Guardian knew we remained concerned that publication risked undermining the investigation, they went ahead with printing and distribution of the paper even while the injunction was being sought."

Sir Ken MacDonald, the director of public prosecutions, called for restraint.

He said: "I think it's very undesirable that there should be material broadcast in the press relating to the continuing police inquiry.

"I'm all for public discussion of criminal justice issues and we've made huge progress in the CPS in putting more and more material about criminal justice into the public domain.

"We're all for openness but while a police inquiry is going on it's very important that there's not public discussion of developments and I think we should try and avoid that."